Europe, despite its troubles, remains the top destination for Chinese investors who are changing their focus from energy and resources to financial markets and technology, a key report said yesterday.

Just under a third of Chinese companies surveyed, 32 per cent, believed that the best investment opportunities will be in western Europe over the next three years, according to a survey conducted by global professional service provider Ernst & Young.

The Middle East and North Africa were favoured by 29 per cent and 22 per cent chose North America.

The survey questioned 146 senior managers from Chinese companies across a range of industries.

"Western Europe continues to be attractive to Chinese investors due largely to its open business environment, as well as undervalued assets as a result of the ongoing eurozone crisis," said Loletta Chow from the China Overseas Investment Network at Ernst & Young.

But Chinese investors should guard against potential risks, the report warned, explaining that many projects owned by private equity funds lacked investor protection.

A greater interest in Europe and North America was also due to a changing investor appetite with energy and resources not playing such a dominant role.

Investment in energy declined from 82 per cent in 2009 to 60 per cent in the first half of 2012, the report said.

"During the past four or five years China's companies injected a large volume of capital into energy and resource deals but these are no longer showing rapid gains," Zhang Yansheng, secretary-general of the Academic Committee of the National Development and Reform Commission, said.

Chinese companies are taking a more studied approach amid changes in the global market, he said.

Technology, agriculture and property are now receiving more investment from China, the report showed.

China's overseas investment registered weakening growth in 2011, with an annual increase of just 1.8 per cent to $60 billion, according to the Ministry of Commerce.

The United Nations Conference on Trade and Development ranked China as the 9th-largest investor globally in 2011.

However, the ministry reported a 48.2 per cent year-on-year growth in China's non-financial investment. About a third of this was achieved through mergers and acquisitions.

The annual volume of China's overseas M&A projects grew significantly from $1.1 billion in 2004 to $48.7 billion in 2011. "Asia remains the largest destination, but Europe is seeing rapid growth amid the eurozone crisis," said Eleanor Wu, from the China Overseas Investment Network at Ernst & Young.

According to the survey, 36 per cent of managers say protectionism in global markets is their top concern. This compares to an average of 28 per cent for Asian companies.

The China Global Investment Tracker database by the Heritage Foundation, a US-based think tank, showed Chinese corporations invested in 492 overseas projects, each worth more than $100 million, since 2005.

Australia, United States and Brazil are the top three investment destinations for Chinese companies, the database showed.

"Those aspiring to invest in the developed markets mainly seek to improve their research, development and technology, but the way ahead for the developed markets is not smooth," said Xing Houyuan, senior expert on Chinese overseas investment at the Chinese Academy of International Trade and Economic Cooperation.

"For Chinese companies, the top priority when it comes to their investment should be China's neighbouring nations and emerging markets," Xing said.

Research and development should be a priority, said Zhang with the NDRC.

"Chinese companies can hardly invest in sales and manufacturing in the developed markets in the short term, given the high costs. What they can do is investing in R&D."

Derek Scissors, a senior research fellow with the Asian Studies Centre at the Heritage Foundation, struck a cautious note.

"Chinese investment is not taking the world by storm financially, nor will it in the near future," he said.

"It does not pose a major threat to the United States, either in the purchase of American assets or expansion of Chinese influence around the globe," Scissors said in an online research note.